Goldman Sachs Faces Probe Into Fixed Income Trading

Goldman Sachs Faces Probe Into Fixed Income Trading

Goldman Sachs Group Inc (NYSE:GS) revealed Friday more regulatory probes into its fixed-income trading and financial advisory businesses.

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Goldman Sachs Group Inc (NYSE:GS) however did not elaborate on the nature of the probe, what fines it could face or what regulatory bodies are conducting the probe.

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Record year for corporate bond issuance

Citing known sources, Justin Baer and Katy Burne of The Wall Street Journal point out the Securities and Exchange Commission has sent requests for information about how banks, including Goldman Sachs, allocate corporate bond deals and how they traded those bonds after they were sold.  The SEC is reportedly examining whether banks grant some money managers too much influence in these offerings, leaving smaller bond investors at a disadvantage.

Last year proved to be a record year for corporate bond issuance.  In September, Verizon Communications Inc launched a $49 billion bond sale, making it the biggest sale of all time, with the previous holder of the title being Apple Inc. (NASDAQ:AAPL). The smartphone maker sold $17 billion in bonds in April.

The leading investment banks underwriting the debt offering felt it would take more than a year for Verizon to raise the funds from the bond market. The remarkable speed at which the bond market picked up on the deal is impressive, and it probably stems from the rising interest rates that have depressed other parts of the economy.

SEC sought information

Justin Baer and Katy Burne of The Wall Street Journal note that the SEC made requests during the fourth quarter and sought information about several specific deals, including the Verizon Communication Inc. (NYSE:VZ)’s record-setting $49 billion bond sale.

The SEC’s request for information is the latest inquiry into alleged preferential treatment of clients by Wall Street in handling hot securities offerings.

Goldman in its filing also lowered the top end of the range of reasonably possible legal losses to $3.6 billion, pruning from $4 billion estimated in the previous quarter. However, Goldman Sachs Group Inc (NYSE:GS) raised its provisions for legal and regulatory issues to $561 million in the fourth quarter, marking a $400 million increase from the third quarter.

Goldman Sachs Group Inc (NYSE:GS)’s other previously disclosed investigations includes one related to the 2008 financial crisis, the public offering process, insider trading and compliance with the U.S. Foreign Corrupt Practices Act.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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